LONDON (Reuters) - Britain's coalition government unveiled a larger-than-expected scheme to help cut the cost of childcare for working parents on Tuesday in an appeal to voters squeezed by several years of stagnant wages and rising prices.
The joint announcement by Prime Minister David Cameron, a Conservative, and his Liberal Democrat Deputy Prime Minister Nick Clegg, comes on eve of Britain's annual budget statement which will set the tone for a 2015 election campaign.
Fiscal policy is expected to be key battleground in the run-up to the election that looks set to be a tight battle with Labour currently slightly ahead in opinion polls.
"Tax free childcare is an important part of our long-term economic plan," said Cameron. "It will help millions of hard-pressed families with their childcare costs and provide financial security for the future."
By mid-to-late 2015 working parents with children under 12 will have 20 percent of their childcare costs paid for the government. The first 10,000 pounds ($16,600) of childcare per year will be eligible for the scheme, meaning voters will receive an annual break of up to 2,000 pounds for each child.
It had been expected that only 6,000 pounds of costs would be eligible for the scheme which is expected to benefit 1.9 million families.
The opposition Labour party welcomed steps to help parents, but said the government action was "too little, too late".
Consultancy KPMG said the scheme could free up more workers and ultimately benefit the economy.
The budget, to be delivered by Conservative finance minister George Osborne on Wednesday, is expected to give a sober analysis of the challenge that Britain still faces to get its finances and debt levels under control.
The latest YouGov survey has Labour with 40 percent support, the Conservatives with 32 percent, the anti-European Union UK Independence Party (UKIP) with 11 percent, and the Liberal Democrats with 9 percent.
(Reporting by William James, Editing by Belinda Goldsmith)